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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                       to

Commission File Number: 001-38594

 

Tilray, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

 

82-4310622

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

1100 Maughan Road

Nanaimo, BC, Canada, V9X IJ2

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (844) 845-7291

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Class 2 Common Stock, $0.0001 par value per share

 

TLRY

 

The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

Non-accelerated filer

 

 

Smaller reporting company

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

 

As of November 9, 2020, the registrant had 133,526,319 shares of Class 2 Common Stock, $0.0001 par value per share, outstanding.

 

 


Table of Contents

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

1

Item 1.

 

Condensed Consolidated Financial Statements (Unaudited)

 

1

 

 

Condensed Consolidated Balance Sheets

 

1

 

 

Condensed Consolidated Statements of Net Loss and Comprehensive Loss

 

2

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

3

 

 

Condensed Consolidated Statements of Cash Flows

 

4

 

 

Notes to Condensed Consolidated Financial Statements

 

5

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

27

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

42

Item 4.

 

Controls and Procedures

 

43

PART II.

 

OTHER INFORMATION

 

44

Item 1.

 

Legal Proceedings

 

44

Item 1A.

 

Risk Factors

 

46

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

73

Item 3.

 

Defaults Upon Senior Securities

 

73

Item 4.

 

Mine Safety Disclosures

 

73

Item 5.

 

Other Information

 

73

Item 6.

 

Exhibits

 

74

Signatures

 

76

 

 

 

 

 

i


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

TILRAY, INC.

Condensed Consolidated Balance Sheets

(in thousands of United States dollars, except for share and par value data, unaudited)

 

 

 

 

 

 

 

 

 

 

 

September 30, 2020

 

 

December 31, 2019

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

155,205

 

 

$

96,791

 

Accounts receivable, net of allowance for credit losses of $826 and provision for sales returns of $1,212 (December 31, 2019 - $615 and $1,400, respectively)

 

 

24,805

 

 

 

36,202

 

Inventory

 

 

89,917

 

 

 

87,861

 

Prepayments and other current assets

 

 

28,154

 

 

 

38,173

 

Assets held for sale

 

 

6,797

 

 

 

 

Total current assets

 

 

304,878

 

 

 

259,027

 

Property and equipment, net

 

 

187,630

 

 

 

184,217

 

Operating lease, right-of-use assets

 

 

18,460

 

 

 

17,514

 

Intangible assets, net

 

 

180,853

 

 

 

228,828

 

Goodwill

 

 

159,595

 

 

 

163,251

 

Equity method investments

 

 

8,911

 

 

 

11,448

 

Other investments

 

 

22,710

 

 

 

24,184

 

Other assets

 

 

4,324

 

 

 

7,861

 

Total assets

 

$

887,361

 

 

$

896,330

 

Liabilities

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

 

26,137

 

 

 

39,125

 

Accrued expenses and other current liabilities

 

 

32,526

 

 

 

50,829

 

Accrued lease obligations

 

 

3,230

 

 

 

2,473

 

Warrant liability

 

 

71,636

 

 

 

 

Total current liabilities

 

 

133,529

 

 

 

92,427

 

Accrued lease obligations

 

 

30,075

 

 

 

29,407

 

Deferred tax liability

 

 

48,090

 

 

 

53,363

 

Convertible notes, net of issuance costs

 

 

438,154

 

 

 

430,210

 

Senior Facility, net of transaction costs

 

 

45,944

 

 

 

 

Other liabilities

 

 

4,852

 

 

 

5,652

 

Total liabilities

 

$

700,644

 

 

$

611,059

 

Commitments and contingencies (refer to Note 18)

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

 

 

Class 1 common stock ($0.0001 par value, 233,333,333 and 250,000,000 shares authorized, respectively; 0 and 16,666,667 shares issued and outstanding, respectively)

 

 

 

 

 

2

 

Class 2 common stock ($0.0001 par value; 500,000,000 shares authorized;

   133,289,944 and 86,114,560 shares issued and outstanding, respectively)

 

 

13

 

 

 

9

 

Additional paid-in capital

 

 

911,171

 

 

 

705,671

 

Accumulated other comprehensive income

 

 

2,689

 

 

 

9,719

 

Accumulated deficit

 

 

(727,156

)

 

 

(430,130

)

Total stockholders’ equity

 

 

186,717

 

 

 

285,271

 

Total liabilities and stockholders’ equity

 

$

887,361

 

 

$

896,330

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


TILRAY, INC.

Condensed Consolidated Statements of Net Loss and Comprehensive Loss

(in thousands of United States dollars, except for share and per share data, unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenue

 

$

51,406

 

 

$

51,101

 

 

$

153,922

 

 

$

120,043

 

Cost of sales

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product costs

 

 

34,224

 

 

 

35,047

 

 

 

108,616

 

 

 

85,806

 

Inventory valuation adjustments

 

 

13,443

 

 

 

201

 

 

 

36,116

 

 

 

726

 

Gross profit

 

 

3,739

 

 

 

15,853

 

 

 

9,190

 

 

 

33,511

 

General and administrative expenses

 

 

12,665

 

 

 

20,122

 

 

 

49,030

 

 

 

49,618

 

Sales and marketing expenses

 

 

10,000

 

 

 

16,974

 

 

 

40,709

 

 

 

39,161

 

Research and development expenses

 

 

921

 

 

 

2,315

 

 

 

2,831

 

 

 

4,891

 

Stock-based compensation expenses

 

 

8,080

 

 

 

8,644

 

 

 

23,404

 

 

 

22,303

 

Depreciation and amortization expenses

 

 

3,425

 

 

 

3,200

 

 

 

10,353

 

 

 

7,457

 

Impairment of assets

 

 

 

 

 

 

 

 

58,210

 

 

 

 

Acquisition-related expenses (income), net

 

 

 

 

 

(13,454

)

 

 

 

 

 

(6,566

)

Loss from equity method investments

 

 

1,420

 

 

 

1,837

 

 

 

4,495

 

 

 

1,837

 

Operating loss

 

 

(32,772

)

 

 

(23,785

)

 

 

(179,842

)

 

 

(85,190

)

Foreign exchange (gain) loss, net

 

 

(9,319

)

 

 

2,585

 

 

 

5,424

 

 

 

1,153

 

Change in fair value of warrant liability

 

 

(31,913

)

 

 

 

 

 

51,275

 

 

 

 

Interest expenses, net

 

 

10,437

 

 

 

8,680

 

 

 

30,147

 

 

 

26,005

 

Finance income from ABG

 

 

 

 

 

(210

)

 

 

 

 

 

(557

)

Other expense (income), net

 

 

(38

)

 

 

(1,116

)

 

 

4,944

 

 

 

(6,185

)

Loss before income taxes

 

 

(1,939

)

 

 

(33,724

)

 

 

(271,632

)

 

 

(105,606

)

Deferred income tax expenses (recoveries)

 

 

134

 

 

 

2,432

 

 

 

(4,013

)

 

 

(3,987

)

Current income tax expenses (benefit)

 

 

243

 

 

 

195

 

 

 

505

 

 

 

402

 

Net loss

 

$

(2,316

)

 

$

(36,351

)

 

$

(268,124

)

 

$

(102,021

)

Net loss per share - basic and diluted

 

 

(0.02

)

 

 

(0.37

)

 

 

(2.23

)

 

 

(1.05

)

Weighted average shares used in computation of net loss per

   share - basic and diluted

 

 

129,100,909

 

 

 

98,130,507

 

 

 

120,128,856

 

 

 

96,742,626

 

Net loss

 

$

(2,316

)

 

$

(36,351

)

 

$

(268,124

)

 

$

(102,021

)

Foreign currency translation gain (loss), net

 

 

2,265

 

 

 

(4,863

)

 

 

(7,184

)

 

 

(2,414

)

Unrealized gain on available-for-sale debt securities

 

 

193

 

 

 

11

 

 

 

154

 

 

 

80

 

Other comprehensive income (loss)

 

 

2,458

 

 

 

(4,852

)

 

 

(7,030

)

 

 

(2,334

)

Comprehensive income (loss)

 

$

142

 

 

$

(41,203

)

 

$

(275,154

)

 

$

(104,355

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

2


TILRAY, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands of United States dollars, except for share data, unaudited) 

 

 

Common stock

 

 

Additional

 

 

Accumulated other

 

 

 

 

 

 

Total

 

 

 

Number of

shares

 

 

Amount

 

 

paid-in

capital

 

 

comprehensive (loss)

income

 

 

Accumulated

deficit

 

 

stockholders' equity

(deficit)

 

Balance as of December 31, 2018

 

 

93,170,867

 

 

$

10

 

 

$

302,057

 

 

$

3,763

 

 

$

(108,177

)

 

$

197,653

 

Cumulative effect adjustment from transition to ASU 2016-01

 

 

 

 

 

 

 

 

 

 

 

803

 

 

 

(803

)

 

 

 

Cumulative effect adjustment from transition to ASC 842

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19

 

 

 

19

 

Shares issued for Natura acquisition

 

 

180,332

 

 

 

 

 

 

15,100

 

 

 

 

 

 

 

 

 

15,100

 

Shares issued for Manitoba Harvest acquisition

 

 

1,209,946

 

 

 

 

 

 

96,844

 

 

 

 

 

 

 

 

 

96,844

 

Shares issued for ABG Profit Participation Agreement

 

 

1,680,214

 

 

 

 

 

 

125,097

 

 

 

 

 

 

 

 

 

125,097

 

ABG finance receivable, net of finance income of $2,700

 

 

 

 

 

 

 

 

(30,292

)

 

 

 

 

 

 

 

 

(30,292

)

Shares issued under stock-based compensation plans

 

 

545,000

 

 

 

 

 

 

931

 

 

 

 

 

 

 

 

 

931

 

Shares issued for employee compensation

 

 

11,868

 

 

 

 

 

 

649

 

 

 

 

 

 

 

 

 

649

 

Stock-based compensation expenses

 

 

 

 

 

 

 

 

5,736

 

 

 

 

 

 

 

 

 

5,736

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

(456

)

 

 

 

 

 

(456

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(29,369

)

 

 

(29,369

)

Balance as of March 31, 2019

 

 

96,798,227

 

 

$

10

 

 

$

516,122

 

 

$

4,110

 

 

$

(138,330

)

 

$

381,912

 

Shares issued under stock-based compensation plans

 

 

530,943

 

 

 

 

 

 

3,483

 

 

 

 

 

 

 

 

 

3,483

 

Shares issued for investment acquisition

 

 

28,361

 

 

 

 

 

 

70

 

 

 

 

 

 

 

 

 

70

 

Stock-based compensation expenses

 

 

 

 

 

 

 

 

7,923

 

 

 

 

 

 

 

 

 

7,923

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

2,974

 

 

 

 

 

 

2,974

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(36,301

)

 

 

(36,301

)

Balance at June 30, 2019

 

 

97,357,531

 

 

$

10

 

 

$

527,598

 

 

$

7,084

 

 

$

(174,631

)

 

$

360,061

 

Shares issued for common stock at-the-market, net of issuance costs

 

 

1,344,166

 

 

 

 

 

 

37,445

 

 

 

 

 

 

 

 

 

37,445

 

Shares issued for Manitoba Harvest  acquisition

 

 

899,306

 

 

 

 

 

 

31,866

 

 

 

 

 

 

 

 

 

31,866

 

Shares issued for investments and S&S acquisition

 

 

433,338

 

 

 

 

 

 

14,438

 

 

 

 

 

 

 

 

 

14,438

 

Finance income for receivable for ABG Profit Participation Arrangement